Aguila vs CA

In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan agreement with a
lending firm called A.C. Aguila & Sons, Co., a partnership. The loan was for P200k. To secure
the loan, the spouses mortgaged their house and lot located in a subdivision. The terms of the
loan further stipulates that in case of non-payment, the property shall be automatically
appropriated to the partnership and a deed of sale be readily executed in favor of the
partnership. She does have a 90 day redemption period.
Ruben died, and Felicidad failed to make payment. She refused to turn over the property and so
the firm filed an ejectment case against her (wherein she lost). She also failed to redeem the
property within the period stipulated. She then filed a civil case against Alfredo Aguila, manager
of the firm, seeking for the declaration of nullity of the deed of sale. The RTC retained the
validity of the deed of sale. The Court of Appeals reversed the RTC. The CA ruled that the sale
is void for it is a pactum commissorium sale which is prohibited under Art. 2088 of the Civil
Code (note the disparity of the purchase price, which is the loan amount, with the actual value of
the property which is after all located in a subdivision).
ISSUE: Whether or not the case filed by Felicidad shall prosper.
HELD: No. Unfortunately, the civil case was filed not against the real party in interest. As
pointed out by Aguila, he is not the real party in interest but rather it was the partnership A.C.
Aguila & Sons, Co. The Rules of Court provide that every action must be prosecuted and
defended in the name of the real party in interest. A real party in interest is one who would be
benefited or injured by the judgment, or who is entitled to the avails of the suit. Any decision
rendered against a person who is not a real party in interest in the case cannot be
executed. Hence, a complaint filed against such a person should be dismissed for failure to
state a cause of action, as in the case at bar.
Under Art. 1768 of the Civil Code, a partnership has a juridical personality separate and distinct
from that of each of the partners. The partners cannot be held liable for the obligations of the
partnership unless it is shown that the legal fiction of a different juridical personality is being
used for fraudulent, unfair, or illegal purposes. In this case, Felicidad has not shown that A.C.
Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal
purposes. Moreover, the title to the subject property is in the name of A.C. Aguila & Sons, Co. It
is the partnership, not its officers or agents, which should be impleaded in any litigation involving

property registered in its name. A violation of this rule will result in the dismissal of the
complaint.

tan eng kee vs CA

Benguet Lumber has been around even before World War II but during the war, its stocks were
confiscated by the Japanese. After the war, the brothers Tan Eng Lay and Tan Eng Kee pooled
their resources in order to revive the business. In 1981, Tan Eng Lay caused the conversion of
Benguet Lumber into a corporation called Benguet Lumber and Hardware Company, with him
and his family as the incorporators. In 1983, Tan Eng Kee died. Thereafter, the heirs of Tan Eng
Kee demanded for an accounting and the liquidation of the partnership.
Tan Eng Lay denied that there was a partnership between him and his brother. He said that Tan
Eng Kee was merely an employee of Benguet Lumber. He showed evidence consisting of Tan
Eng Kees payroll; his SSS as an employee and Benguet Lumber being the employee. As a
result of the presentation of said evidence, the heirs of Tan Eng Kee filed a criminal case
against Tan Eng Lay for allegedly fabricating those evidence. Said criminal case was however
dismissed for lack of evidence.
ISSUE: Whether or not Tan Eng Kee is a partner.
HELD: No. There was no certificate of partnership between the brothers. The heirs were not
able to show what was the agreement between the brothers as to the sharing of profits. All they
presented were circumstantial evidence which in no way proved partnership.
It is obvious that there was no partnership whatsoever. Except for a firm name, there was no
firm account, no firm letterheads submitted as evidence, no certificate of partnership, no
agreement as to profits and losses, and no time fixed for the duration of the partnership. There
was even no attempt to submit an accounting corresponding to the period after the war until
Kees death in 1984. It had nobusiness book, no written account nor any memorandum for that
matter and no license mentioning the existence of a partnership.
In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole proprietorship.
He registered the same as such in 1954; that Kee was just an employee based on the latters
payroll and SSS coverage, and other records indicating Tan Eng Lay as the proprietor.

Also, the business definitely amounted to more P3,000.00 hence if there was a partnership, it
should have been made in a public instrument.

PASCUAL v. Commissioner of Internal Revenue:

On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et al.
and on May 28, 1966, they bought another three (3) parcels of land from Juan Roque. The first
two parcels of land were sold by petitioners in 1968 to Marenir Development Corporation, while
the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson on March
19,1970. Petitioner realized a net profit in the sale made in 1968 in the amount of P165, 224.70,
while they realized a net profit of P60,000 in the sale made in 1970. The corresponding capital
gains taxes were paid by petitioners in 1973 and 1974 .
Respondent Commissioner informed petitioners that in the years 1968 and 1970, petitioners as
co-owners in the real estate transactions formed an unregistered partnership or joint venture
taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed
under Section 24, both of the National Internal Revenue Code; that the unregistered partnership
was subject to corporate income tax as distinguished from profits derived from the partnership
by them which is subject to individual income tax.
ISSUE:
Whether petitioners formed an unregistered partnership subject to corporate income tax
(partnership vs. co-ownership)
RULING:
Article 1769 of the new Civil Code lays down the rule for determining when a transaction should
be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3, provides:(2) Coownership or co-possession does not itself establish a partnership, whether such co-owners or
co-possessors do or do not share any profits made by the use of the property; (3) The sharing
of gross returns does not of itself establish a partnership, whether or not the persons sharing
them have a joint or common right or interest in any property from which the returns are derived;

The sharing of returns does not in itself establish a partnership whether or not the persons
sharing therein have a joint or common right or interest in the property. There must be a clear
intent to form a partnership, the existence of a juridical personality different from the individual
partners, and the freedom of each party to transfer or assign the whole property.
In the present case, there is clear evidence of co-ownership between the petitioners. There is
no adequate basis to support the proposition that they thereby formed an unregistered
partnership. The two isolated transactions whereby they purchased properties and sold the
same a few years thereafter did not thereby make them partners. They shared in the gross
profits as co- owners and paid their capital gains taxes on their net profits and availed of the tax
amnesty thereby. Under the circumstances, they cannot be considered to have formed an
unregistered partnership which is thereby liable for corporate income tax, as the respondent
commissioner proposes.
And even assuming for the sake of argument that such unregistered partnership appears to
have been formed, since there is no such existing unregistered partnership with a distinct
personality nor with assets that can be held liable for said deficiency corporate income tax, then
petitioners can be held individually liable as partners for this unpaid obligation of the
partnership.
Santos vs reyes
In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally
instituted a partnership with them as partners. Their venture is to set up a lending business
where it was agreed that Santos shall be financier and that Nieves and Zabat shall contribute
their industry. **The percentages after their names denote their share in the profit.
Later, Nieves introduced Cesar Gragera to Santos. Gragera was the chairman of a corporation.
It was agreed that the partnership shall provide loans to the employees of Grageras corporation
and Gragera shall earn commission from loan payments.
In August 1986, the three partners put into writing their verbal agreement to form the
partnership. As earlier agreed, Santos shall finance and Nieves shall do the daily cash flow
more particularly from their dealings with Gragera, Zabat on the other hand shall be a loan
investigator. But then later, Nieves and Santos found out that Zabat was engaged in another
lending business which competes with their partnership hence Zabat was expelled.
The two continued with the partnership and they took with them Nieves husband, Arsenio, who
became their loan investigator.

Later, Santos accused the spouses of not remitting Grageras commissions to the latter. He
sued them for collection of sum of money. The spouses countered that Santos merely filed the
complaint because he did not want the spouses to get their shares in the profits. Santos argued
that the spouses, insofar as the dealing with Gragera is concerned, are merely his employees.
Santos alleged that there is a distinct partnership between him and Gragera which is separate
from the partnership formed between him, Zabat and Nieves.
The trial court as well as the Court of Appeals ruled against Santos and ordered the latter to pay
the shares of the spouses.
ISSUE: Whether or not the spouses are partners.
HELD: Yes. Though it is true that the original partnership between Zabat, Santos and Nieves
was terminated when Zabat was expelled, the said partnership was however considered
continued when Nieves and Santos continued engaging as usual in the lending business even
getting Nieves husband, who resigned from the Asian Development Bank, to be their loan
investigator who, in effect, substituted Zabat.
There is no separate partnership between Santos and Gragera. The latter being merely a
commission agent of the partnership. This is even though the partnership was formalized shortly
after Gragera met with Santos (Note that Nieves was even the one who introduced Gragera to
Santos exactly for the purpose of setting up a lending agreement between the corporation and
the partnership).
HOWEVER, the order of the Court of Appeals directing Santos to give the spouses their shares
in the profit is premature. The accounting made by the trial court is based on the total income
of the partnership. Such total income calculated by the trial court did not consider the expenses
sustained by the partnership. All expenses incurred by the money-lending enterprise of the
parties must first be deducted from the total income in order to arrive at the net profit of the
partnership. The share of each one of them should be based on this net profit and not from the
gross income or total income.

Yulo vs yang
Yang Chiao Seng wrote a letter to a Yulo, proposing the formation of a partnership between
them to run and operate a theatre. Among the principal conditions offered were: first, that Yulo
would have a guaranteed monthly participation of P3,000; and second, that the partnership shall
last for a period of two years and six months.
Yulo accepted the offer and the parties executed a partnership agreement. The capital was fixed
at P100,000, P80,000 of which was to be furnished by Yang and P20,000 by the Yulo. All gains
were to be distributed among the partners in the same proportion as their capital contribution
and Yulos liability, in case of loss, shall be limited to her capital contribution. Later, they
executed a supplementary agreement, wherein they extended the partnership for three (3)
years and the benefits were now to be divided equally between them.

They built the theatre on a piece of land, which was leased under Yulos name. Two months
before the partnership was due to expire, the Yulo demanded from Yang her share in the profits
of the business. In a letter, Yang explained that he had stopped paying monthly rentals due to
the pending ejectment case brought by the landlords against the Yulo. Inasmuch as he was the
sub-lessee, he was retaining the rentals to make good the rentals due from the Yulo in arrears.
Thus, the Yulo filed a suit for damages against him for maliciously refusing to give her share in
the partnership profits.
In his answer, Yang claimed that the real agreement between them was not one of partnership
but of lease. The partnership was merely adopted as a subterfuge to get around the prohibition
contained in the contract of lease between them and the landowners.
The trial court rendered judgment in favor of Yang. It held that the real agreement between them
is one of lease since under the agreement, Yulo did not actually share either in the profits or in
the losses as required by the Civil Code for partnerships.
Issue: whether or not Yulo and Yangs relationship is that of a Partnership.
On appeal, the Supreme Court upheld the lower courts decision. Under Article 1767 of the Civil
Code, the following are the requisites of a partnership: 1) two or more persons who bind
themselves to contribute money, property, or industry to a common fund; and 2) the intention on
the part of the partners to divide the profits among themselves. SC also held that, In the first
place, Yulo did not furnish the supposed P20,000 capital. Second, she did not furnish any help
or intervention in management of the theatre. Third, it does not appear that she has ever
demanded from [Yang] any accounting of the expenses and earnings of the business. Were she
really a partner, her first concern should have been to find out how the business was
progressing, whether the expenses were legitimate, whether the earnings were correct, etc. She
was absolutely silent with respect to any of the acts that a partner should have done; all that she
did was to receive her share of P3,000 a month, which cannot be interpreted in any manner
than a payment for the use of the premises which she had leased from the owners
Lim vs Lim
In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a partnership agreement with
Jimmy Yu and Norberto Uy. The three contributed P50,000.00 each and used the funds to
purchase a truck to start their trucking business. A year later however, Jose Lim died. The
eldest son of Jose Lim, Elfledo Lim, took over the trucking business and under his management,

the trucking business prospered. Elfledo was able to but real properties in his name. From one
truck, he increased it to 9 trucks, all trucks were in his name however. He also acquired other
motor vehicles in his name.
In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart attack. Elfledos wife, Juliet
Lim, took over the properties but she intimated to Jimmy and the heirs of Norberto that she
could not go on with the business. So the properties in the partnership were divided among
them.
Now the other heirs of Jose Lim, represented by Elenito Lim, required Juliet to do an accounting
of all income, profits, and properties from the estate of Elfledo Lim as they claimed that they are
co-owners thereof. Juliet refused hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired his properties from the partnership that
Jose Lim formed with Norberto and Jimmy. In court, Jimmy Yu testified that Jose Lim was the
partner and not Elfledo Lim. The heirs testified that Elfledo was merely the driver of Jose Lim.
ISSUE: Who is the partner between Jose Lim and Elfledo Lim?
HELD: It is Elfledo Lim based on the evidence presented regardless of Jimmy Yus testimony in
court that Jose Lim was the partner. If Jose Lim was the partner, then the partnership would
have been dissolved upon his death (in fact, though the SC did not say so, I believe it should
have been dissolved upon Norbertos death in 1993). A partnership is dissolved upon the death
of the partner. Further, no evidence was presented as to the articles of partnership or contract
of partnership between Jose, Norberto and Jimmy. Unfortunately, there is none in this case,
because the alleged partnership was never formally organized.
Petitioners failed to adduce any evidence to show that the real and personal properties acquired
and registered in the names of Elfledo and Juliet formed part of the estate of Jose, having been
derived from Joses alleged partnership with Jimmy and Norberto. Elfledo was not just a hired
help but one of the partners in the trucking business, active and visible in the running of its
affairs from day one until this ceased operations upon his demise. The extent of his control,
administration and management of the partnership and its business, the fact that its properties
were placed in his name, and that he was not paid salary or other compensation by the
partners, are indicative of the fact that Elfledo was a partner and a controlling one at that.